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Imf Says Obsession With Home Ownership Is Burdening Britain's Economic Recovery

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http://www.dailymail.co.uk/news/article-3042709/Our-household-debt-bad-Portugal-IMF-says-obsession-home-ownership-burdening-Britain-s-economic-recovery.html

Our household debt is as bad as Portugal: IMF says obsession with home ownership is burdening Britain's economic recovery
  • Borrowing to buy has left UK more indebted than other developed nations
  • Britain and Portugal - which had to seek emergency funds - singled out
  • IMF's Global Financial Report a stark reminder that recovery is still fragile
  • International body says increasing the housing supply must be top priority

One of today's Mail headlines!

And in the comments there's this:

Lord Lucan, That would be telling, Brazil, 7 minutes ago

It's not just the cost of buying, the cost or renting is also ridiculously exorbitant. It's also not just personal expenditure and borrowing, 41% of new borrowing goes to pay the interest on the UK's existing loans. The UK's debt has just passed 100% to GDP. The UK's debt has doubled in the last ten last five years and tripled in the ten and now tops 1.5 trillion depending who figures you accept. Just were do people think this is leading to? If you are not sure, ask the Greeks, or Spanish, or Irish, or Italian or indeed the Portuguese.

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But nothing else matters apart from HPI. The wider economy struggles on. I'm really surprised that the business communities don't join together on this. What kind of economy exists when people's money's spent before they leave their front door?

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But nothing else matters apart from HPI. The wider economy struggles on. I'm really surprised that the business communities don't join together on this. What kind of economy exists when people's money's spent before they leave their front door?

Seems to me that, compared to 20 years ago, there isnt much being made in the UK, and the business communities you talk of are busy selling, marketing, doing up, furnishing, decorating and planting houses.

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I don't think it's the obsession with home ownership as such - it's more the obsessive idea in many circles that high and ever-increasing house prices are a good and desirable thing.

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Seems to me that, compared to 20 years ago, there isnt much being made in the UK, and the business communities you talk of are busy selling, marketing, doing up, furnishing, decorating and planting houses.

Well there's over 5 million SMEs in the UK. A good proportion of them will be completely unrelated to the housing sector. It just seems to me that the more money that's "ear-marked" to fixed costs of keeping a roof over your head (including utility bills which have shot up faster than wages over the last decade), the less discretionary spending you have. Maybe the rise of Aldi and fall of Tesco is a rough indicator of this.

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Well there's over 5 million SMEs in the UK. A good proportion of them will be completely unrelated to the housing sector. It just seems to me that the more money that's "ear-marked" to fixed costs of keeping a roof over your head (including utility bills which have shot up faster than wages over the last decade), the less discretionary spending you have. Maybe the rise of Aldi and fall of Tesco is a rough indicator of this.

Im an SME, as are about 10 of my mates....services.

We all rely on wealth being created in the Country. If we arent generating wealth, then its all going to rats.

Sure, people say Insurance is a big wealth creator, but, not really, its an industry based on gambling on outcomes...no wealth, no money to gamble. Finance is the same.

and our balance of trade says also, we are losing millions on a daily basis.

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Im adding to the mess.I import 100% from China.Container after container.I invest the profits mostly outside of sterling.My job was "off-shored" a decade ago.So i thought ok il do it myself and went to China.

No doubt there will be a sterling crisis at some point.Hardly any wealth creation and a huge welfare system in a deflation environment doesnt bode well.

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Im adding to the mess.I import 100% from China.Container after container.I invest the profits mostly outside of sterling.My job was "off-shored" a decade ago.So i thought ok il do it myself and went to China.

No doubt there will be a sterling crisis at some point.Hardly any wealth creation and a huge welfare system in a deflation environment doesnt bode well.

The public sector and public-funded sectors are hardly tiny either.

Sterling crisis -> grand coalition -> IMF -> mass layoffs/restructure of public sector, public sector pension default - les money at a higher age, and major benefits restructuring - no tax credits, contribution based system + limited housing benefit.

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Sectoral balances innit.

Gidiot cutting government spending requires increases in household debt.

If you believe in cutting "welfare" then you believe in higher house prices.

Can't have it both ways fellas.

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the rich money needs to go find somewhere else to park their stash. They get x% as rent, x% as HPI. Give them somewhere else to stick their funds, or tax them to death on it to make it unattractive. The roof above our head should not be allowed to become a speculation exercise. Thats for shares etc.

I cant compete with a billionaire when evaluating a home for fair value. He sees x% as rent guaranteed by the state, and x% HPI (pretty much guaranteed by the state).

I see a 25yr commitment to my family, and stagnant wages.

Ergo, the sales process is broken, and price discovery cannot take place fairly.

Edited by madmax2

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I think you are referring to 'self employed'. That is another matter entirely.

Indeed. 70% of the staff on my current IT project are self-employed/SME's. Their day rates are the same or less than in 2010.

Some older people say their rates are half what they had in 97-2000, during the tech boom and run-up to Y2K......

Most have a big mortgage and quite a few have leveraged high into BTL.

So, they might not be employed by a housing related industry, but they all have their money in housing.

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Sectoral balances innit.

Gidiot cutting government spending requires increases in household debt.

If you believe in cutting "welfare" then you believe in higher house prices.

Can't have it both ways fellas.

Uk households are saturated with debt and we are already at the zlb - further significant increases are therefore impossible.

The result of cutting govt spending will be higher unemployment not higher house prices. Persistent, structural unemployment is likely to be a feature of the UK economy for many years to come.

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http://www.theguardian.com/politics/2015/apr/17/imf-chief-praises-british-governments-handling-of-economy

The head of the International Monetary Fund, Christine Lagarde, has praised the British government’s management of the economy, saying it is “clearly delivering results”.

Her comments came a day after the Washington-based organisation took a gloomier view of the UK’s growth prospects over the next five years. It said Britain’s next government would struggle to reduce the budget deficit – the difference between tax income and government spending – and that rising household debt was threatening the recovery.

Speaking at a press conference in Washington alongside the UK chancellor, George Osborne, Lagarde took a more praiseworthy stance, saying the coalition had struck the right balance between spending cuts and tax income to deliver growth.

Lagarde, who is presiding over the IMF’s annual spring meeting, said the government had adopted a “smart fiscal policy – what I meant by that ... is a set of policies that are actually targeted and tailored to the state of the economy. And what clearly has been demonstrated in the past is that the UK authorities are capable of adjusting to the economic reality in order to provide the right balance of spending cuts, revenue raising and in the order, in the proportion and in the pace that is appropriate to the economy.

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IMF's (and other countries) praise of the UK, seems like the equivalent of ex-Everton Manger David Moyes being twice awarded (2003 & 2009) LMA (League Managers Association) Manager of the Year Award (voted for by fellow managers).

A diplomatic pat on the head away from the serious business of challenging for trophies / or in economy... being productive and running surpluses, building savings, and lower house prices/rents. "Carry on you're doing great..." whilst we glory in the money of Champions League qualifying games / regular trophy hauls.

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Sectoral balances innit.

Gidiot cutting government spending requires increases in household debt.

If you believe in cutting "welfare" then you believe in higher house prices.

Can't have it both ways fellas.

I know how contemptuously most of you here hold Joe Public with regard to media manipulation, but if you give any credence whatsoever to posts like this one then in all truth you are little different.

If you don't know WHY the comment above is drivel, both on an accounting and empirical basis, then you need to start educating yourself.

[R K supposedly has me on ignore, but we all know that he reads my posts and this is in reality a convenience to avoid engaging with me. If he wishes to prove his repeated claims on sectoral financial balances, government borrowing, household debt and house prices then I am only too willing to debate him.]

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Some older people say their rates are half what they had in 97-2000

ROFL - Like 38 year olds you mean. I know plenty of 50 year olds who's day rate has gone from £400 to zero.

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